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Handling Dirty Money

When we use the words “Dirty Money” we are not using them in the literal sense meaning your money is covered with bad germs or contaminated with harmful bacteria like salmonella and E. coli. Nor are we referring to rap artist’s Sean “Diddy” Combs’ hip-hop group called “Dirty Money.” When we say, “Dirty Money,” we mean your money is “dirty” if it is illegally earned, transferred, or used. This money is obtained from criminal or corrupt sources and usually finds its way into the legal banking system.

“Money laundering” happens when “dirty money,” obtained from criminal activities, is converted through legitimate business, into assets that cannot easily be traced back to their illegal source or origins. According to the Financial Action Task Force (FATF), money laundering is the process by which the proceeds of crime are made to appear legitimate. The money can come from a range of criminal activities, such as theft, drug dealing, corruption, human trafficking, fraud, prostitution, and embezzlement. Dirty money is disguised in a wide variety of simple and sophisticated ways. See the FATF’s FAQ on money laundering for more information.

Money laundering is illegal in the BVI and its activities are monitored and investigated under the Proceeds of Criminal Conduct Act. If you know money was involved in criminal activity and you still launder or assist in laundering it, you have committed an offense under the Proceeds of Criminal Conduct Act.

Case Study: Borrowing Kane’s Dirty Money

Say you make your money legally from your food van and from your administrative job in a
trust company. You know your brother, Kane, is a drug trafficker who does not have a job or
other source of legitimate income but he always has excess cash. You want to build a small
apartment building, but you’ve only saved half the money you need. Instead of going to the
bank for a loan, you decide to get the loan from Kane. He offers to give you the money in
return for joint ownership of the apartment building. Kane gives you the extra $250,000
you need and you build the apartment building. Later, you open a bank account from the
proceeds of the building with both you and Kane as the account holders. The rent checks are
deposited to this joint account and money is withdrawn from it for the building’s
maintenance. In borrowing Kane’s dirty money and using it to fund a legal business, you
have engaged in money laundering – you took money obtained through an illegal activity
(drug trafficking) and changed it into a legal business asset (the apartment building). You
have committed a crime.

The Joint Anti-Money Laundering and Terrorist Financing Advisory Committee (JALTFAC)
maintains oversight of anti-money laundering and combating the financing of terrorism
(AML/CFT) in the BVI. JALTFAC outlines three stages of laundering:

Placement – the physical disposal of criminal process. This may include taking the
cash from an illegal activity and depositing it in the bank, moving the money from one
country to another, or making a loan to a legitimate business.

Layering – is the separation of criminal proceeds from their source by the creation
of layers of transactions designed to disguise the audit trail and provide the appearance
of legitimacy. This may include rapid switches of funds between banks and jurisdictions,
use of cash deposits as collateral for legitimate transaction, or switching cash through a
network of legitimate businesses and “shell” companies across several jurisdictions.

Integration – is the stage in which criminal proceeds are treated as legitimate.
If layering has succeeded, the integration places the criminal proceeds back into the
economy in such a way that they appear to be legitimate funds or assets.